The History of Money (Encore)

Money Layers

The concept of money is more complex than it appears, with economists struggling to define it precisely. Gary Arndt explains the multi-layered definition of money, starting with M0, which includes all currency in circulation, such as paper notes and coins. M1 builds on this by adding checking accounts and savings accounts, while M2 includes short-term cash investments like money market accounts. He notes that M2 is the level most economists focus on.

The lowest level is called M0, and M0 is nothing more than the currency which is in circulation.

--- Gary Arndt

Further layers, M3 and M4, incorporate larger deposits and short-term corporate papers, reflecting the complexity of defining money 1.

   

Global Supply

The global money supply is vast and varied, with estimates reaching $430 trillion when considering all forms of money. Gary Arndt highlights that while the total currency amounts to about $90 trillion, the broader definitions account for much more. This discrepancy arises from different definitions of money across countries, making it challenging to pinpoint an exact figure.

If you added up all the various forms of money in every country, it is estimated that there are the equivalent of $430 trillion worth of money in total on earth.

--- Gary Arndt

Despite these complexities, gold remains a significant part of the monetary system, and digital currencies are emerging as influential players 1.